The onset of digital era has changed the way we do business. As the cost of computing power halves almost every two years ( as explained in Moore’s Law), the amount of data that is created and processed doubles, providing the essential fuel for the “second machine age.” . This exponential growth in amount of data together with the seemingly endless possibilities of cloud computing and the changing dynamics of the workforce is changing the way businesses operate . In this changing business ecosystem, Finance is expected to play a leading role in the transformation of the organization. Ritesh Bhushan, SAP S/4HANA Finance Capability Leader at Deloitte EMEA, explains you how organizations can achieve this.
Digital disruptions are impacting finance and it is no longer just expected to report the numbers but rather drive organization’s response to changing business models and exploding data volumes. Finance no longer owns analysis exclusively and is consistently challenged to demonstrate value addition. Finance is now under pressure to manage its own operations. Best-in-class finance means finding ways to automate everything, generate insights, and increase decision speed / accuracy. This level of unprecedented disruption has enhanced finance’s focus on updating core system and existing capabilities while critically evaluating the skills needed for the finance workforce of the future.
A digital core is essential first step
The speed of digital transformation varies across different sector due to the factors driving the change . For some sectors it drives operational efficiency and for others it is a matter of survival. Below is a simplified view of digital progression across sectors although outliers could be found in each sector.
Fig A- Level of digital progression across sectors ( Source: Deloitte Study 2018)
Organizations are increasingly investing in the digital transformation programs and are proactively looking for digital value creation through using innovative technologies to drive operational efficiencies and competitive edge.
However, Organizations need to shape their digital transformation journey almost always beginning with the core ERP modernization.
A Digital core for finance enables harmonization and optimization of finance data and processes while laying the foundation for organizations to fully take advantage of the rapid innovations in technology. A robust digital core gives the flexibility to integrate with exponential technologies as they mature, ensuring agility in responding to changing business needs and creating differentiating value driven by finance.
Why finance should transform first
Over years, finance functions across industries have banked the benefits of finance transformation programs by optimizing the workforce footprint and deploying location strategy. However, constraints of a federated and outdated core ERP system has significantly impacted the effectiveness of such large transformations. Most large organizations run SAP as their core ERP and we increasingly see finance lead the transformation partly due to following reasons
- CFO’s are championing the digital agenda and are sponsoring digital transformations for finance
- SAP technology modernization began with finance first ( simple finance as precursor to S/4HANA)
- Majority of finance processes are foundational in nature and will greatly benefit from centralization and harmonization of processes on a digital finance core
- Finance is at the heart of all processes, to effectively complete a Digital Transformation it is essential to transform finance
- Finance organizations are struggling to attract & retain talent, technology modernization is a must
One of the key reasons as stated above is SAP technology modernization for finance with advent of S/4HANA. We have seen that all large S/4HANA transformations include finance in the implementation scope and majority of them include central finance as a very first step. This strategy de risks overall transformation while ensuring that a single source of truth is established first to drive near real time and insightful reporting. The most desired outcomes from finance transformation for all companies that have undergone this journey are:
- Single source of truth
- Near real-time & insightful reporting
- Elimination of manual tasks
Outcomes for the vast majority of the companies are optimized operations leading to digital process excellence include following objectives:
- Efficient and integrated business planning
- Unified data across geographies
- Better, faster regulatory compliance
What are the “watch-outs” for finance undergoing digital transformation?
There are five key principle that influence the outcome of digital transformation. We believe losing focus on these key principles could lead to failure of attaining your overall objective.
- Vision- It’s crucial to have a bold and clear vision that is well articulated and understood across the organization. If the vision is not bold enough and not clearly articulated. Transformation is perceived as incremental improvements by the organization ie business as usual…
- Value: Too much attention is given to the “digital” aspects of the transformation shifting away from how value is created and the speed of which value can be delivered. Measuring and reporting value creation is essential for continuous buy in of stakeholders
- Data: Clear definition and enforcement of common data (information ) model will lay foundation for robust, accurate and consistent data across the organization
- Innovation: Not enough attention is given to innovation and market disruption signals. Often market innovation outpaces project execution leaving no opportunities to adapt. This needs to be addressed by adopting “agile” in execution to allow space for innovation.
- Change Management: Change should be addressed beyond just system readiness. Ability to have metrics to have granular view on the readiness on the organization with metrics at the people level is key to sustain change.
Above all, such transformation program require greater level of rigor in execution and this is where organizations need to devote time to plan well and monitor execution to eliminate risks of failure.
Want to hear more about how companies have chosen finance as the starting point for their digital transformation and succeeded at it? Join Ritesh Bhushan at Connect to Innovate on 1 and 2 October